HC strictures for J&J in drug pricing case

Confirming a penalty imposed by National Pharmaceutical Pricing Authority (NPPA) on drug major Johnson & Johnson (J&J) and its subsidiary, the Bombay High Court has said that the two companies tried to "defeat order made in public interest and (thereby) defeat public interest."

When central government capped the price of a hematinic drug manufactured by J&J, to "bypass" it, J&J transferred the right to manufacture the drug to its wholely owned subsidary NR Jet, the court observed.

J&J and NR Jet will have to pay, jointly, a penalty of Rs 22.35 crore and interest of Rs 12 crore thereupon, imposed by NPPA for overpricing.

In August 1996, under the Essential Commodities Act, central government fixed the price of the drug Raricap-40 at Rs 16.24. The tablets, produced by J and J are used for improving quality of blood.

But J&J continued to price it at Rs 24.57 per pack of 40 tablets.

In March 1997, J&J stopped making the drug and transferred the production rights and trademark to NR Jet. NR Jet started making it from the very next day.

In October 2002, NPPA issued notice to both the companies for overpricing, and finally imposed a fine of Rs 25 crore, plus an interest of Rs 12 crore. (Fine amount was revised later to Rs 22.35 crore.)

The order was challenged in the High Court. NR Jet's argument was that the order was applicable only to J&J, which manufactured the drug when central government capped the drug's price.